1. 1 Winding up by the court

2. 2 Introduction Introduction Winding-up or liquidation Winding-up or liquidation Ending the life of a company Ending the life of a company Assets are sold off Assets are sold off Debts are paid Debts are paid Surplus funds distributed amongst shareholders or in accordance with the Memorandum and articles Surplus funds distributed amongst shareholders or in accordance with the Memorandum and articles

3. 3 During winding up process – company continues to exist During winding up process – company continues to exist Upon completion of winding up – company ceases to exist by formal act of dissolution Upon completion of winding up – company ceases to exist by formal act of dissolution

4. 4 By order of Court – compulsory winding up By order of Court – compulsory winding up By special resolution of company – voluntary winding up By special resolution of company – voluntary winding up

5. 5 Commencing a Winding Up By court order – petition to court By court order – petition to court members passed a special resolution agreeing to be wound up members passed a special resolution agreeing to be wound up company does not commence business within a year from date of incorporation or suspends business for a whole year company does not commence business within a year from date of incorporation or suspends business for a whole year company has no member company has no member

6. 6 company is unable to pay its debts – a company is deemed to be unable to pay its debts if it owes $10,000 or more, and a statutory demand has been served on the company company is unable to pay its debts – a company is deemed to be unable to pay its debts if it owes $10,000 or more, and a statutory demand has been served on the company a predetermined event for triggering off winding up as provided in the M.A. or A.A. has occurred a predetermined event for triggering off winding up as provided in the M.A. or A.A. has occurred the court is of the opinion that it is just and equitable that the company should be wound up the court is of the opinion that it is just and equitable that the company should be wound up

7. 7 The “just and equitable” ground Where the main object of the company has failed Where the main object of the company has failed Where the company was formed to carry out a fraud or to carry on an illegal business Where the company was formed to carry out a fraud or to carry on an illegal business Where the members have formed a company on the basis of relationship involving mutual trust, understanding, and confidence which no longer exists Where the members have formed a company on the basis of relationship involving mutual trust, understanding, and confidence which no longer exists

8. 8 Application by Company Registrar to wind up a company Company carrying on for an unlawful purpose Company carrying on for an unlawful purpose Private company has no director or no secretary for more than 6 months Private company has no director or no secretary for more than 6 months Non-private company has less than 2 directors or no secretary for more than 6 months Non-private company has less than 2 directors or no secretary for more than 6 months

9. 9 Company has failed to pay annual registration fee Company has failed to pay annual registration fee Company has been persistently in breach of its obligation under the Companies Ordinance Company has been persistently in breach of its obligation under the Companies Ordinance

10. 10 Voluntary Winding Up Circumstances where a company may be wound up voluntarily - Circumstances where a company may be wound up voluntarily - Period fixed for its existence expires Period fixed for its existence expires Predetermined event triggering off winding up occurs Predetermined event triggering off winding up occurs Special resolution of company to be wound up Special resolution of company to be wound up

11. 11 Special resolution of company that it cannot by reason of its liabilities continue Special resolution of company that it cannot by reason of its liabilities continue Majority of directors deliver to the Registrar a winding-up statement Majority of directors deliver to the Registrar a winding-up statement

12. 12 Summary procedure for winding up by the court If the Court is satisfied, or if Official Receiver or provisional liquidator reports to the court, that If the Court is satisfied, or if Official Receiver or provisional liquidator reports to the court, that The property of the company is not likely to exceed in value $200,000 the court may make an order the company be wound up in a summary manner. The property of the company is not likely to exceed in value $200,000 the court may make an order the company be wound up in a summary manner. No need for setting up a committee of inspection and liquidator has all powers without the need for sanction by that committee. No need for setting up a committee of inspection and liquidator has all powers without the need for sanction by that committee.

13. 13 Consequences of a winding up order No action or proceedings can be continued or commenced against the company except by leave of the court No action or proceedings can be continued or commenced against the company except by leave of the court The liquidator will take all the property and things in action to which the company appears to be entitled into his custody or under his control The liquidator will take all the property and things in action to which the company appears to be entitled into his custody or under his control

14. 14 Appointment of Liquidator Appointment of Liquidator Involuntary winding up – appointed by court Involuntary winding up – appointed by court Voluntary winding up – by shareholders if directors are able to declare that the company is solvent Voluntary winding up – by shareholders if directors are able to declare that the company is solvent

15. 15 Powers and duties of the liquidator Section 199 of the Companies Ordinance Section 199 of the Companies Ordinance Assumes powers of directors Assumes powers of directors Selling off assets Selling off assets Debts paid to the extent possible Debts paid to the extent possible

16. 16 If asset insufficient to pay debts, members to contribute if shares not fully paid If asset insufficient to pay debts, members to contribute if shares not fully paid Surplus funds distributed amongst the shareholders Surplus funds distributed amongst the shareholders Subject to duties laid down in the Ordinance and Winding Up Rules Subject to duties laid down in the Ordinance and Winding Up Rules

17. 17 Means to increase amount of money available to pay creditors or to return capital to members: Fraudulent trading Fraudulent trading Breach of duty Breach of duty Unfair preference Unfair preference

18. 18 Distribution of assets All debts must be considered by the liquidator All debts must be considered by the liquidator Creditors must prove their debt or claim and establish any claim to priority. Creditors must prove their debt or claim and establish any claim to priority.

19. 19 Secured Creditor: Secured Creditor: Obtain payment from proceeds of selling the security Obtain payment from proceeds of selling the security Balance of sale proceeds over debt must be paid to liquidator Balance of sale proceeds over debt must be paid to liquidator Sale proceed insufficient – balance as an unsecured debt Sale proceed insufficient – balance as an unsecured debt

20. 20 Unsecured Creditors – Unsecured Creditors – Paid from remaining assets after secured creditors are paid Paid from remaining assets after secured creditors are paid Except – priority debts: Except – priority debts: Costs of the winding up Costs of the winding up Preferential debts Preferential debts

21. 21 Preferential Debts – Preferential Debts – Salaries owing to employees during 4 months before winding up and other payments Salaries owing to employees during 4 months before winding up and other payments Tax and rates due to the Government during the 12 months before winding up Tax and rates due to the Government during the 12 months before winding up Certain contracts of insurance Certain contracts of insurance